Merger and acquisition activity has recently reached record highs, and that momentum shows no signs of slowing soon. Recently, we sat down with Guhan Subramanian, faculty chair of Mergers and Acquisitions: Strategy, Execution, and Post-Merger Management to learn more about the inaugural session and setting the stage for productive negotiations.
Mergers and acquisitions have become a popular vehicle for driving growth in today's global economy. Who will benefit most from this program?
M&A has become much more essential to the overall leadership toolkit than it was 40 years ago. It's central to every CEO and every board member in every industry who faces complex challenges, including hedge-fund activism, hostile takeovers, and cross-border deals. So we designed the cross-functional curriculum to meet the needs of these diverse business leaders—from C-Suite executives, directors of public and private companies, and M&A advisers to investment bankers, transactional lawyers, and private equity investors.
When you were designing the curriculum, what were your two top goals?
Our overall goal was to show that the negotiation is bigger than just the bargaining table. To do this, we ask participants to consider not only the dynamics in the room, but also how to arrange the chessboard in a way that gives them a strategic advantage before they even step into the room. We also want everybody to leave with a more rounded toolkit. For example, bankers may be world experts on finance, but might not understand negotiation in a formal way. On the other hand, a CEO would typically have deep operational expertise, but not as much skill in the financial negotiation. This program provides everyone with a more systematic approach and a broader toolkit.
Which matters most in closing a deal, finance or negotiation skills?
Finance expertise is very important, because you have to know the numbers and pricing, but negotiation skills are also vital if you want to achieve the best deal. As a guest in my class, a famous banker, once said to me, "In finance or in M&A, we sometimes debate whether the weighted average cost to capital should be 7.95% or 8.10%. But it doesn't really matter, because it's all about the negotiation process." I talk a lot about this in Dealmaking, one of the books that participants will receive at the start of the program.
The program also delves into valuation, strategy, and post-merger management. How does this benefit participants?
Many executives have never had systematic training in these areas. The cross-disciplinary curriculum provides a holistic view of the M&A process—from start to finish and beyond. Once that toolkit is in place, they'll be able to take the game to the next level and move forward in a much more effective way. The benefit is being able to step outside the day-to-day, think broadly about a context that might not be your own, and then bring those lessons back to your context.
You mentioned the program's multidisciplinary perspective. Could you expand on that a bit?
One of the best things about Harvard Business School is the fluidity across units, and that's especially essential for a course like this. You can't do a meaningful course in M&A without having a cross-disciplinary perspective. Certain aspects of negotiation that you wouldn't see in typical courses—deal process design, managing auction processes, sell-side and buy-side strategies—are part of the mix in our program. The faculty brings a diverse set of backgrounds and expertise to the table, as well as a very deep track record in real-world deals. So we have a broad brush for painting the full negotiation landscape.
What's different about the classroom exercises in this program?
We give people an opportunity to try things out in a risk-free environment. After learning the concepts, each participant will receive a confidential role assignment. They'll prepare individually, try to negotiate a deal with a counterparty, and then see what does and doesn't work. This will be a very powerful learning experience because in a real M&A deal, you only get to see what actually happened. But here, you’ll get the chance to see 40 observations of the same negotiation and what could have been. That diversity of outcomes and processes allows us to compare and contrast and then diagnose what is most effective in the room.
What can participants expect during the first day of the program?
First, we'll map out the entire negotiation landscape. It's a very systematic approach to preparation and work coordination, sort of a game plan for the negotiation itself. As you think about tactics, you need to ask yourself: Who else might be interested in that property? Who are all the parties, and what are their interests? Then we'll dive into the standard negotiation toolkit around interest, option generation, and BATNA (Best Alternative To a Negotiated Agreement) assessment. This program also focuses on the cultural aspects of negotiation. For example, how do you manage the complexity of cross-border deals?
You've often said that negotiation is the key to creating and capturing value for the organization. Is that true in internal functions as well?
Yes, individuals in every function are constantly negotiating with their colleagues. The diversity and magnitude of the negotiation situations that our participants face are going to be transformative for their organizations and for themselves in their careers. For example, acquiring a significant company in a different industry or geography is often transformational. It's important not only to get the price and other deal terms right, but also to ensure that the deal can work for the longer term.
On a personal note, what surprises you most about doing research and teaching at Harvard Business School?
What really surprised me was that I wasn't just excited about being at Harvard Business School—I was obsessed with it. I love the teaching environment, the energy of the place, and the connection to the real world. Our faculty is focused on changing and improving the practice of business in our various fields of expertise, and we try to be relevant and influential in a very positive way every single day.